How Washington is killing the economy — Lowered expectations — Flash: Iran may be close to building nuke

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HOW WASHINGTON IS KILLING THE ECONOMY — POLTICO’s Ben White: “The latest round of fiscal drama has sputtered to a temporary close, but the routine crises have one clear victim: the U.S. economy, which is once again losing altitude. And for the third year in a row, Washington gets much of the blame. There’s not much hope for a quick turnaround. The most recent slowdown — highlighted by poor job growth, softening corporate earnings and decimated confidence — comes just as Republicans and Democrats prepare to square off in a fresh fight over the federal budget with another potential shutdown looming in January and a renewed debt ceiling crisis possible in February.

“Washington’s drag on the economy now springs from a multiplying array of sources, including the constant threat of devastating fiscal crisis, the blunt nature of the sequester spending cuts, the troubled roll-out of Obamacare and the now deeply strained relations with key economic allies over clandestine surveillance allegations. Taken together, Washington’s toxic politics and poorly executed policies have all but ensured that fourth quarter growth comes in soft after forecasters initially predicted a strong close to the year. And they mean that 2014, which initially looked like a possible breakout year for the U.S. economy, now seems like it will be a dreary rerun of 2013”

LOWERED EXPECTATIONS – “‘The fourth quarter is now going to be much weaker than I expected,’ said Beth Ann Bovino, chief U.S. economist at Standard & Poor’s. ‘And now all these fiscal deadlines are pushed into January and February and that’s going to weigh on 2014. I don’t think we breach the debt ceiling next year, but it’s hard to see any long-term resolution given the very toxic environment on Capitol Hill.’ …

INTERNATIONAL PROBLEMS — “And the problems now stretch overseas. The White House this week had to address reports that the U.S. monitored the cell phone of German Chancellor Angela Merkel. .. The reports of espionage in Germany followed complaints from the heads of state of Brazil and France … ‘The U.S. is taking a big hit to its foreign policy and its standing internationally,’ said Ian Bremmer, founder and president of Eurasia Group, a political risk analysis firm. ‘There are trade deals now that may not move forward, and that is a very big deal longer-term.’” http://politi.co/16zEu6f

FLASH: IRAN MAY BE CLOSE TO BUILDING NUKE — USA Today’s Oren Dorell: “Iran could produce enough weapons-grade uranium to build a nuclear bomb in as little as a month, according to a new estimate by one of the USA's top nuclear experts.

The new assessment comes as the White House invited Senate staffers to a briefing on negotiations with Iran as it is trying to persuade Congress not to go ahead with a bill to stiffen sanctions …

“David Albright, president of the institute and a former inspector for the U.N. International Atomic Energy Agency, said the estimate means that Iran would have to eliminate more than half of its 19,000 centrifuges to extend the time it would take to build a bomb to six months.” http://usat.ly/19CfMFP

TWITTER GOES CAUTIOUS ON VALUATION — NYT’s Michael J. de la Merced and Vindu Goel: “Twitter … disclosed that it planned to sell 70 million shares at $17 to $20 each. At the midpoint of that range, the offering would raise about $1.3 billion and would value Twitter at about $10 billion, excluding options … Such a valuation would make Twitter more than three times as big as one of the first big Internet giants, AOL, but only a fraction of Facebook, the last big Internet initial public offering, which now has a market value of more than $127 billion. …

“Twitter has also moved up the pricing of its offering by more than a week, to Nov. 6. That means that the social network would then begin trading on the New York Stock Exchange, under the ticker symbol TWTR, the next day” http://nyti.ms/1bkbQZB

TOP STORY: GERMANY AND FRANCE UNITE VS U.S. ON SPYING — FT’s Peter Spiegel and James Fontanella-Khan in Brussels: “Angela Merkel, the German chancellor, said she and her French counterpart would launch a ‘joint initiative’ to renegotiate their intelligence services’ co-operation with the US, saying new protocols must be set in the wake of revelations of widespread American eavesdropping on European leaders. Ms Merkel said other countries were welcome to join the initiative, but at the outset they would involve only parallel bilateral efforts between the American intelligence agencies and, separately, Paris and Berlin.

“Although she did not lay out specific red lines to be included in such agreements, some officials said she is likely seeking something similar to the “five eyes” deal between the US, UK, Canada, Australia and New Zealand, in which the English-speaking allies work almost seamlessly on signals intelligence. The insistence on renegotiating the agreements is likely to ratchet up the transatlantic tensions over spying by the US National Security Agency, which Berlin alleges tapped into Ms Merkel’s personal mobile phone.” http://on.ft.com/Hktnrj

GOOD FRIDAY MORNING — M.M. is feeling a bit better about his World Series pick after the Cardinals stirring 4-2 win over Boston in Game Two. It was especially impressive given the average age of the Cardinals three pitchers in the game was around 12. http://es.pn/1bkpJaa

DRIVING THE DAY — President Obama heads to NYC today where he will visit Pathways in Technology Early College High School (P-TECH) in Brooklyn. He will discuss “the importance of ensuring that the next generation of middle class American workers and entrepreneurs have the skills they need to compete and win in a global economy.” … Obama does the usual two NYC fundraising events in the evening, one for the DCCC one for the DNC before heading back to DC … Durable goods orders at 8:30 a.m. expected to rise 2.2%, 0.5% ex-transportation … Univ. of Michigan Consumer Sentiment expected to decline to 75.0 from 75.2 …

** From the Chief White House correspondent for The New York Times, Peter Baker, comes the definitive history of the Bush and Cheney White House — a tour de force narrative of those dramatic and controversial eight years. Start reading now: http://politi.co/1euuFvJ **

RYAN SEEKS LIMITED GOALS FOR BUDGET TALKS — POLITICO’s David Rogers: “House Budget Committee Chairman Paul Ryan said Thursday he is encouraged by his early talks with Senate Democrats and hopes the two parties can skip past ‘grand bargains’ and focus on ‘achievable’ goals such as substituting entitlement reforms for sequestration cuts this winter. … ‘If this becomes just an excuse to raise taxes, it’s not going to be successful,’ he warned Democrats.

“‘We already have spending cuts coming. We’ll take those. If we can have smarter spending cuts, that’s better.’ … Implicit in Ryan’s remarks is a warning that Republicans won’t back away from sequestration simply to protect defense. But the chairman was clearly signaling he is open to a good-faith bargain in which mandatory savings can be substituted for appropriations to restore more order for both sides” http://bit.ly/16z3YRo

OOPS! NO ONE CHECKED THAT OBAMACARE SITE WOULD WORK – WSJ’s Amy Schatz: “No one in the government made sure the many complex parts of the federal health-insurance website worked together properly, and testing of the complete site didn't take place until two weeks before its Oct. 1 launch, contractors said at the first congressional hearings into the matter. …

“The website's botched launch has become the biggest threat to the success of … Obama's health law, just days after Democrats beat back a Republican bid to defund it. More Democrats said Thursday that penalties on those who lack health insurance — a linchpin of the law — should be delayed because of the difficulties many people have had in navigating the site” http://on.wsj.com/1gKEmKS

YELLEN TO BEGIN SENATE ROUNDS — POLITICO’s Kevin Cirilli: “Janet Yellen, will soon begin meeting with senators to make the case for why she should be confirmed to lead the U.S. central bank. Yellen is initially focusing on members of the Senate Banking Committee, which has jurisdiction over her nomination. She has scheduled meetings in the coming weeks with Sens. Richard Shelby (R-Ala.), Elizabeth Warren (D-Mass.), Jon Tester (D-Mont.), Sherrod Brown (D-Ohio), Joe Manchin (D-W.Va.), Jeff Merkley (D-Ore.) and Dean Heller (R-Nev.), according to Hill aides. …

“Meetings with other senators are in the works, including with Bob Corker (R-Tenn.) and Heidi Heitkamp (D-N.D.), according to aides. … While Yellen could face opposition from Fed-wary Republicans, such as Sen. Rand Paul (R-Ky.), she’ll likely face no opposition from Democrats” http://bit.ly/HkoGO2

ALSO FOR YOUR RADAR –

BE CAREFUL ON ACELA — POLITICO’s Dylan Byers: “Tom Mattzie, the former Washington director of MoveOn.org Political Action, eavesdrops on former National Security Agency Director Michael Hayden as he gives ‘off record’ quotes to the press, on the condition he be cited as a "former senior administration" official” http://politi.co/16z0IVU

SCHWARZMAN BULLISH ON CHINA — Bloomberg: “Stephen Schwarzman, chief executive officer of Blackstone Group LP, said China offers good long-term opportunities because of the government’s economic management, after a recent economic slowdown proved milder than many analysts had forecast. The world’s biggest private-equity firm is investing in property projects including distribution centers and a skyscraper in Shanghai, Schwarzman said in an interview with Bloomberg Television today …

“A Communist Party meeting next month may produce ‘very substantial reforms,’ he said, while visiting Beijing for the groundbreaking of Schwarzman Scholars College at Tsinghua University. … The 66-year-old billionaire is donating $100 million to the $300 million Schwarzman Scholars program at Tsinghua, which will enroll students from the U.S., Europe and countries including South Korea, Japan and India.

EXAMINING THE FED BOARD — The Conference of State Bank Supervisors has an excellent white paper looking at forces affecting the composition of the Board: http://bit.ly/1bk91HR

FDA CRACKS DOWN ON PAINKILLERS — NYT’s Barry Meier: “The Food and Drug Administration on Thursday recommended tighter controls on how doctors prescribe the most commonly used narcotic painkillers, changes that are expected to take place as early as next year. The move, which represents a major policy shift, follows a decade-long debate over whether the widely abused drugs, which contain the narcotic hydrocodone, should be controlled as tightly as more powerful painkillers like OxyContin. … The change would reduce the number of refills patients could get before going back to see their doctor.

“Patients would also be required to take a prescription to a pharmacy, rather than have a doctor call it in. Prescription drugs account for about three-quarters of all drug overdose deaths in the United States, with the number of deaths from narcotic painkillers, or opioids, quadrupling since 1999, according to federal data. Drugs containing hydrocodone represent a huge share — about 70 percent — of all opioid prescriptions, and the looser rules governing them, some experts say, have contributed to their abuse." http://nyti.ms/1aIKj2p

FED POSES NEW LIQUIDITY REQUIREMENTS — FT’s Gina Chon in Washington: “The Federal Reserve on Thursday proposed new liquidity requirements for large US banks aimed at helping them withstand a credit crunch, including some tougher standards than those contained in the Basel III international regulatory accord.

Fed governor Daniel Tarullo called the Fed liquidity rules ‘super equivalent’ to Basel because of those differences. For example, what is covered under high quality liquid assets is narrower in the Fed rules than in Basel III. The US proposal does not include covered bonds or private label mortgage-backed securities …

“The Fed is also proposing that banks fully implement the new standards one year earlier than the EU and two years earlier than Basel III. Fed officials estimate banks face a $200bn shortfall out of the $2tn in high-quality assets needed to meet the liquidity requirements. At times, the US has been tougher on standards than regulators in Europe. For some of the largest banks, the US is also considering a higher leverage ratio that doubles the 3 per cent ratio set by Basel. The liquidity rules require banks to maintain a minimum liquidity coverage ratio, measured by high-quality liquid assets to the total net cash outflow over 30 days, of 100 per cent.” http://on.ft.com/1c1SQjz

THIS MORNING ON POLITICO PRO FINANCE— Jon Prior on the push for a vote Mel Watt’s FHFA nomination [http://politico.pro/16yoeCu] … Kate Davidson on the new liquidity proposal [http://politico.pro/17hKWEX] … To learn more about Pro's subscriber-only coverage — and to get Morning Money every day before 6 a.m. — please contact Pro Services at (703) 341-4600 or info@politicopro.com.

** In Days of Fire, Peter Baker, Chief White House Correspondent for The New York Times, takes us on a gripping and intimate journey through the eight years of the Bush and Cheney administration in a tour-de-force narrative of a dramatic and controversial presidency. Days of Fire is a monumental and definitive work that will rank with the best of presidential histories. As absorbing as a thriller, it is eye-opening and essential reading. : http://politi.co/1euuFvJ **